The Cooper Companies Announces Second Quarter 2010 Results
The Cooper Companies Announces Second Quarter 2010 Results
PLEASANTON, Calif., Jun 3, 2010 (GlobeNewswire via COMTEX News Network) -- The Cooper Companies, Inc. (NYSE:COO) today announced financial results for the fiscal second quarter ended April 30, 2010.
-- Revenue increased 11% year-over-year to $289.3 million. CooperVision
(CVI) revenue up 11% to $242.3 million, and CooperSurgical (CSI) revenue
up 10% to $47.0 million.
-- GAAP earnings per share (EPS) 10 cents, down from 54 cents in last
year's second quarter. Non-GAAP EPS 61 cents. See "Reconciliation of
Non-GAAP EPS to GAAP EPS" shown below.
-- Second quarter free cash flow $60.4 million.
Commenting on the results, Robert S. Weiss, Cooper's president and chief executive officer said, "We delivered a very strong second quarter across our vision and surgical businesses. Both businesses posted double-digit revenue growth, and we remain committed to investing in our sales and marketing efforts to continue gaining market share. Overall, we are pleased with our financial results, especially our trailing four quarter free cash flow of $218.2 million, and we believe CooperVision and CooperSurgical are well positioned for future growth."
Second Quarter GAAP Operating Highlights
-- Revenue $289.3 million, 11% above second quarter 2009, 10% in constant
currency.
-- Gross margin 57% consistent with last year's second quarter.
-- Operating margin 13% compared with 16% in last year's second quarter.
Increases in selling and marketing costs drove SG&A to 38% of sales, up
from 36%.
-- Depreciation and amortization expense $24.0 million.
-- Interest expense $9.7 million or 3% of sales vs. $10.8 million or 4% of
sales in last year's second quarter. Interest expense decreased as a
result of lower debt and lower interest rates.
-- Litigation settlement charge $27.0 million included in earnings per
share.
-- Total debt decreased $30.4 million to $712.9 million. At quarter end
there was $360.0 million outstanding under the Company's $650.0 million
revolver.
-- Cash provided by operations $71.6 million and capital expenditures $11.2
million resulted in free cash flow of $60.4 million. Trailing twelve
month cash provided by operations $282.2 million and capital
expenditures $64.0 million resulted in free cash flow of $218.2 million.
Second Quarter CooperVision (CVI) GAAP Operating Highlights
-- Revenue $242.3 million, up 11% from last year's second quarter, up 10%
in constant currency. Revenue gains were delivered throughout all
product categories and geographic regions.
-- Revenue by category:
% of Constant
(In CVI % Currency
millions) Revenue chg % chg
2Q10 2Q10 y/y y/y
--------- ------- --- --------
Toric $ 74.7 31% 23% 18%
Multifocal 18.3 7% 9% 6%
Single-use sphere 50.4 21% 18% 11%
Non single-use sphere,
other 98.9 41%
--------- ------- 2% 6%
Total $ 242.3 100%
========= ======= 11% 10%
-- Revenue by geography:
% of Constant
(In CVI % Currency
millions) Revenue chg % chg
2Q10 2Q10 y/y y/y
--------- ------- --- --------
Americas $ 110.4 45% 13% 12%
EMEA 86.6 36% 6% 13%
Asia Pacific 45.3 19%
--------- ------- 18% 3%
Total $ 242.3 100%
========= ======= 11% 10%
-- Selected revenue by material:
% of Constant
(In CVI % Currency
millions) Revenue chg % chg
2Q10 2Q10 y/y y/y
--------- ------- ---- --------
Proclear $ 69.5 29% 17% 12%
Silicone hydrogel $ 54.0 22% 136% 126%
-- Gross margin 55% compared with 56% in the second quarter of 2009. The
decrease in gross margin was largely attributable to costs associated
with the 2009 CooperVision manufacturing restructuring plan.
-- Operating margin 14% compared with 16% in last year's second quarter.
The decrease in operating margin was largely attributable to higher
sales and marketing costs.
Second Quarter CooperSurgical (CSI) GAAP Operating Highlights
-- Revenue $47.0 million, up 10% from last year's second quarter, organic
growth 5%.
-- Revenue by category:
% of
(In CSI %
millions) Revenue chg
2Q10 2Q10 y/y
--------- ------- ---
Office $ 26.8 57% 4%
Hospital 16.7 36% 19%
Fertility
Clinic 3.5 7%
--------- ------- 20%
Total $ 47.0 100%
========= ======= 10%
-- Gross margin 62%, up from 61% in the second quarter of 2009. Higher
gross margin was primarily driven by manufacturing efficiencies.
-- Operating margin 24%, down from 26% in last year's second quarter. The
decrease in operating margin was largely attributable to higher sales
and marketing costs.
2010 Guidance
The Company amends its full-year 2010 guidance. Guidance is summarized as follows:
FY10 Guidance FY10 Guidance
Old New
------------------ ------------------
Revenue
(In
millions)
CVI $925 -- $975 $925 -- $975
CSI $185 -- $195 $185 -- $195
Total $1,110 -- $1,170 $1,110 -- $1,170
EPS
GAAP $2.17 -- $2.27 $1.76 -- $1.86
Non-GAAP
* $2.45 -- $2.55 $2.50 -- $2.60
Free Cash
Flow (In
millions) $130 -- $150 $140 -- $160
* Excludes the impact of the litigation settlement and related charges, the 2009 CooperVision manufacturing restructuring plan and CooperSurgical acquisition costs. See "Reconciliation of Non-GAAP EPS to GAAP EPS" shown below.
Reconciliation of Non-GAAP EPS to GAAP EPS
To supplement our financial results and guidance presented on a GAAP basis, we use non-GAAP measures that we believe are helpful in understanding our results. As indicated in the table below, the non-GAAP measures exclude the securities class action litigation settlement and related charges, restructuring costs and costs related to acquisitions. We exclude these items because we do not consider them reflective of our ongoing operating performance. Our non-GAAP financial results and guidance are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements and guidance prepared in accordance with GAAP. Our management uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods.
Non-GAAP operating income, net income and diluted EPS results and guidance exclude costs related to the securities class action litigation settlement, the 2009 CooperVision manufacturing restructuring plan announced in August 2009, and costs related to CooperSurgical acquisitions. Non-GAAP net income and diluted EPS for the fiscal second quarter of 2010 excluded related costs of $23.8 million or 51 cents per share. We did not incur similar costs in the fiscal second quarter of 2009.
The settlement costs associated with the securities class action litigation are recognized as a pre-tax litigation settlement charge of $27.0 million along with related $0.2 million in pre-tax unreimbursed legal fees in our fiscal second quarter 2010. The restructuring costs, primarily severance and costs associated with assets, related to the pending closure of the Norfolk manufacturing plant and are primarily recorded in cost of sales. We expect to recognize total pre-tax restructuring charges under this plan of approximately $24.0 million. We recognized $5.1 million in fiscal 2009, $2.3 million in the fiscal first quarter of 2010, $3.6 million in the fiscal second quarter of 2010, with the remaining $13.0 million spread over the remainder of fiscal 2010. The acquisition costs, principally legal and other due diligence costs, are primarily recorded in selling, general and administrative expense. We believe it is useful for investors to understand the effects of these litigation, restructuring and acquisition costs on our total operating results.
We also report revenue growth using the non-GAAP financial measure of constant currency revenue. Management presents and refers to constant currency information so that revenue results may be evaluated excluding the effect of foreign currency rate fluctuations. To present this information, current period revenue for entities reporting in currencies other than United States dollars are converted into United States dollars at the average foreign exchange rates for the corresponding period in the prior year.
Three Months Ended April 30,
-------------------------------------
2010
GAAP Adjustments 2010 Non-GAAP
-------- ----------- --------------
Operating income $39,034 $4,124 $43,158
Income before income
taxes $2,472 $31,124 $33,596
(Benefit from)
provision for income
taxes ($1,984) $7,329 $5,345
Net income $4,456 $23,795 $28,251
Diluted EPS $0.10 $0.51 $0.61
Fiscal 2010 EPS Guidance
-------------------------------------
2010
GAAP Adjustments 2010 Non-GAAP
-------- ----------- --------------
$1.76 --
Diluted EPS $1.86 $0.74 $2.50 -- $2.60
Conference Call and Webcast
The Company will host a conference call today at 5:00 PM ET to discuss its fiscal second quarter 2010 financial results. The dial in number in the United States is +1-800-561-2718 and outside the United States is +1-617-614-3525. The passcode is 19979857. There will be a replay available approximately two hours after the call ends until Thursday, June 10, 2010. The dial-in number for the replay in the United States is +1-888-286-8010 and outside the United States is +1-617-801-6888. The replay passcode is 41976416. This call will be broadcast live on our website at www.coopercos.com and at www.streetevents.com. A transcript will be available on our website within 24 hours after the conference call.
About The Cooper Companies
The Cooper Companies, Inc. (www.coopercos.com) manufactures and markets specialty healthcare products through its CooperVision and CooperSurgical units. Corporate offices are in Pleasanton, CA.
CooperVision, Inc. (www.coopervision.com) develops, manufactures and markets a broad range of contact lenses for the worldwide vision correction market. Headquartered in Pleasanton, CA, it manufactures in: Juana Diaz, Puerto Rico; Norfolk, VA; Rochester, NY; Adelaide, Australia; and Hamble and Hampshire, UK.
CooperSurgical, Inc. (www.coopersurgical.com) develops, manufactures and markets medical devices, diagnostic products and surgical instruments and accessories used primarily by gynecologists and obstetricians. Its major manufacturing and distribution facilities are in Trumbull, CT, Pasadena, CA, and Stafford, TX.
Forward-Looking Statements
This news release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Statements relating to guidance, plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact, including all statements regarding anticipated growth in our revenue, CooperVision's manufacturing restructuring plan and expected results of operations, integration of any acquisition, and litigation are forward-looking. To identify these statements look for words like "believes," "expects," "may," "will," "should," "could," "seeks," "intends," "plans," "estimates" or "anticipates" and similar words or phrases. Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties.
Among the factors that could cause our actual results and future actions to differ materially from those described in forward-looking statements are: adverse changes in global or regional general business, political and economic conditions due to the current global economic downturn, including the impact of continuing uncertainty and instability of U.S. and international credit markets that may adversely affect the Company's or its customers' ability to meet future liquidity needs; limitations on sales following new product introductions due to poor market acceptance; new competitors, product innovations or technologies; the Company's failure to realize anticipated savings, or its incurrence of unexpected costs, from CooperVision's manufacturing restructuring plan; a major disruption in the operations of our manufacturing, research and development or distribution facilities due to technological problems, natural disasters, CooperVision's manufacturing restructuring plan or other causes; disruptions in supplies of raw materials, particularly components used to manufacture our silicone hydrogel and other hydrogel lenses; the impact of acquisitions or divestitures on revenues, earnings or margins; losses arising from pending or future litigation or product recalls; interest rate and foreign currency exchange rate fluctuations; the requirement to provide for a significant liability or to write off, or accelerate depreciation on, a significant asset, including goodwill; changes in U.S. and foreign government regulation of the retail optical industry and of the healthcare industry generally; changes in tax laws or their interpretation and changes in effective tax rates; dilution to earnings per share from acquisitions or issuing stock and other events described in our Securities and Exchange Commission filings, including the "Business" and "Risk Factors" sections in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2009, as such Risk Factors may be updated in quarterly filings.
We caution investors that forward-looking statements reflect our analysis only on their stated date. We disclaim any intent to update them except as required by law.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
-------------------------------------------------
(In thousands)
(Unaudited)
October
April 30, 31,
2010 2009
---------- ----------
ASSETS
Current assets:
Cash and cash
equivalents $9,829 $3,932
Trade receivables, net 174,291 170,941
Inventories 238,756 260,846
Deferred tax assets 28,030 23,360
Other current assets 42,543 44,799
---------- ----------
Total current assets 493,449 503,878
---------- ----------
Property, plant and
equipment, net 569,486 602,568
Goodwill 1,255,177 1,257,029
Other intangibles, net 120,864 114,700
Deferred tax assets 28,470 27,781
Other assets 41,779 45,951
---------- ----------
$2,509,225 $2,551,907
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $13,567 $9,844
Accrued litigation
settlement 27,000 --
Other current
liabilities 167,689 165,570
---------- ----------
Total current
liabilities 208,256 175,414
---------- ----------
Long-term debt 699,381 771,630
Other liabilities 46,284 48,065
Deferred tax liabilities 12,576 16,456
---------- ----------
Total liabilities 966,497 1,011,565
---------- ----------
Stockholders' equity 1,542,728 1,540,342
---------- ----------
$2,509,225 $2,551,907
========== ==========
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
------------------------------------------------------------------------
(In thousands, except earnings per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Net sales $289,271 $260,594 $549,530 $511,736
Cost of sales 125,778 111,537 236,274 220,545
-------- -------- -------- --------
Gross profit 163,493 149,057 313,256 291,191
Selling, general and
administrative expense 111,340 93,705 211,918 188,697
Research and development expense 8,573 10,065 16,200 17,295
Restructuring costs 47 -- 410 2,954
Amortization of intangibles 4,499 4,080 8,716 8,257
-------- -------- -------- --------
Operating income 39,034 41,207 76,012 73,988
Interest expense 9,730 10,830 19,955 22,287
Litigation settlement charge 27,000 -- 27,000 --
Other income (expense), net 168 260 (2,159) 8,404
-------- -------- -------- --------
Income before income taxes 2,472 30,637 26,898 60,105
(Benefit from) provision for
income taxes (1,984) 5,988 2,020 11,583
-------- -------- -------- --------
Net income $4,456 $24,649 $24,878 $48,522
======== ======== ======== ========
Diluted earnings per share $0.10 $0.54 $0.54 $1.07
======== ======== ======== ========
Number of shares used to compute
earnings per share 46,367 45,523 46,197 45,204
======== ======== ======== ========
Soft Contact Lens Revenue Update
Worldwide Market vs. CooperVision (Constant Currency)
The data below is extracted from a compilation of industry participants' revenue by the Contact Lens Institute (CLI), an independent market research firm. This data is compiled using gross product sales at foreign exchange rates set by CLI. It therefore excludes items such as discounts, rebates, currency hedges and freight reimbursements.
Worldwide Manufacturers' Soft Contact Lens Revenue
(U.S. dollars in millions; constant currency; unaudited)
------------------------ ------------------------
Calendar 1Q10 Calendar 2009
------------------------ ------------------------
Market CVI Market CVI
Market Change Change Market Change Change
-------- ------ ------ -------- ------ ------
Sales by Category
Spheres $ 1,207 4% 9% $ 4,736 1% 7%
Torics 295 11% 16% 1,084 8% (2%)
Multifocal 73 259
-------- 22% 10% -------- 20% 16%
WW Soft Contact
Lenses $ 1,575 $ 6,079
======== 6% 11% ======== 3% 5%
Sales by Modality
Single Use $ 532 10% 14% $ 2,092 3% 14%
Other 1,043 3,987
-------- 5% 10% -------- 3% 3%
WW Soft Contact
Lenses $ 1,575 $ 6,079
======== 6% 11% ======== 3% 5%
Sales by Material
Hydrogel $ 958 (1%) (3%) $ 3,932 (5%) (3%)
Silicone Hydrogel 617 2,147
-------- 21% 139% -------- 20% 113%
WW Soft Contact
Lenses $ 1,575 $ 6,079
======== 6% 11% ======== 3% 5%
Sales by Geography
Americas $ 637 7% 14% $ 2,320 4% 4%
EMEA 472 9% 12% 1,848 6% 7%
Asia Pacific 466 1,911
-------- 4% 4% -------- (1%) 3%
WW Soft Contact
Lenses $ 1,575 $ 6,079
======== 6% 11% ======== 3% 5%
United States $ 554 6% 13% $ 1,999 3% 4%
International 1,021 4,080
-------- 6% 10% -------- 3% 5%
WW Soft Contact
Lenses $ 1,575 $ 6,079
======== 6% 11% ======== 3% 5%
COO-E
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SOURCE: The Cooper Companies, Inc.
CONTACTS: The Cooper Companies, Inc.
Albert G. White, III, VP, Investor Relations and Treasurer
Kim Duncan, Director, Investor Relations
925-460-3663
ir@coopercompanies.com
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